Skills shortages, cybersecurity occupy minds of directors

Australia’s skills shortage has emerged as the number one concern affecting director confidence in the latest Director Sentiment Index (DSI) released by the Australian Institute of Company Directors (AICD).

The results, which were released today, saw 60 per cent of directors nominate labour shortages as the major challenge facing Australian businesses, followed by inflation and rising interest rates.

The Index also revealed that 83 per cent of directors believed skilled migration levels were not keeping up with labour demand, which will have a likely negative impact on future business growth.

The survey of nearly 1,500 directors was conducted by Roy Morgan from 15-27 September, after the National Jobs Summit and skilled migrant numbers being lifted for this financial year from 160,000 to 195,000.  

AICD Managing Director and CEO Mark Rigotti MAICD said increasing and boosting education and training should be at the heart of our economic response post COVID.

“The lack of skilled labour impacts the ability of organisations to combat current challenges including cyber security, the transition to net zero and digital transformation,” he said.

Overall director sentiment has dropped to negative 8.5, its lowest point in two years, mainly driven by concerns about the global economy and softer business conditions domestically.

AICD’s Chief Economist Mark Thirwell said the decrease in sentiment is a reflection of the difficult economic circumstances facing the global and Australian economies.

“The international economic environment looks particularly challenging, and it is notable that directors rank current and expected future domestic economic conditions above those in the US, China, Europe and Asia ex China,” he said.

For the first time, the second half DSI asked respondents to rate the performance of the Reserve Bank and its decisions on monetary policy.

While directors largely agree that the Reserve Bank is increasing rates at the right pace, they do believe it will lead to a significant increase in business insolvencies and a housing debt crisis.

• 51 per cent of directors believe the RBA is raising rates at the right pace to fight inflation.
• 62 per cent of directors believe further increases to interest rates will cause a housing/mortgage crisis.
• 51per cent of directors believe monetary policies will cause a major uptick in business insolvency.
• Almost half (47 per cent) of directors think the current review into the Reserve Bank should propose significant changes.

It’s no surprise that cyber security continues to be the number one issue keeping directors awake at night. The result underlines the focus on cyber in the boardroom, given the survey was in field before the recent Optus cyber attack.

While the survey shows that directors are cognisant of the cyber risk threat to their organisation, it also presents provides an insight into the opportunity for further improvement, with just 60 per cent of directors agreeing their board has sufficient oversight of cyber risk.

The Cyber Principles which the AICD will launch this week with support organisations to proactively guard against this increasing level of threat.

The Principles have been developed in partnership with the Cyber Security Cooperative Research Centre (CSCRC) and provide a practical framework to support directors in governing cyber security risk and building organisational cyber resilience.

Other key findings from the Director Sentiment Index include:

• Climate change continues to be the key long-term issue for the federal government to address in the long-term
• Trust in the federal government has risen nine points since the last index to 38 per cent. Two-thirds of directors (63 per cent) believe advancing reconciliation with First Nations peoples is a national governance priority.
• Three out of five directors believe domestic economic conditions are likely to be impacted by adverse developments between China and Taiwan.